Category Archives: Big Oil

Alaska’s oil windfall


Oil revenue accounts for 90% of Alaska’s tax haul, and a booming energy sector puts more money into residents’ pockets.

CNNMoneyMarkets | Feb 29, 2012

By Maureen Farrell

NEW YORK (CNNMoney) — Alaska has a big vested interest in high oil and gas prices.

Oil revenue accounts for 90% of the state’s tax haul. So its budget swells and oil royalties gush into a special state investment fund — the only one of its kind in the United States.

And that can translate into windfalls for residents, who share in the oil bounty through annual dividends paid by the fund and, in boom times, direct payments from the state.

For example, when oil and gas hit record highs in 2008, residents received $3,000 checks, twice what they normally get.

“Things become much easier for the state when oil prices are high,” said Gerald McBeath, a professor at the University of Alaska at Fairbanks. “It makes it possible for them to increase funding for schools, construction and protection services.”

But, of course, there’s a dark side to high oil prices.

Alaska is a net importer of food and other consumer staples, the cost of which rise when energy prices spike. Residents get hit with outsize fuel and food prices.
What’s behind the gas price spike

In addition, the state investment fund’s investments — primarily stocks, bonds and real estate — usually take a hit if the economy cools.

Still overall, rising gas prices mean higher revenues for the state’s treasury.

In 2011, Alaska collected $7 billion from oil companies, up from $6.2 billion in 2010.

Now if oil prices continue to climb, the state will exceed the $8.9 billion it had projected it would earn in 2012. Back in 2008, revenues hit $11.3 billion.

And unlike fiscally-strapped states struggling over which public services to cut, Alaskan officials are deciding whether to increase state-backed programs or create new ones. Examples include a $4.3 billion hydroelectric dam or more dividend checks to residents.

“Whenever we have money in the treasury, people come forward with ideas to spend it,” said Steve Colt, a professor at the University of Alaska at Anchorage. “There’s a long laundry list of smaller projects that people are advocating for.”

The state’s treasury now holds reserves of $12.1 billion, the largest amount of any U.S. state.

Alaska collects income from oil companies in three ways: excavation taxes, corporate taxes on oil profits and royalties. The treasury gets 75% of the royalty payments, and the oil investment fund gets the rest.

The Alaska Permanent Fund was created in 1976, soon after oil started moving through the TransAlaska pipeline. The idea was to give residents a cut of the state’s oil revenues in the form of an annual dividend.

The royalties have helped the fund build a $41 billion portfolio.

The dividend to residents is based on the fund’s returns over the past five years. That helps smooth out oil’s boom and bust years. During good years, the fund gets more in royalties, but typically those years coincide with challenging economic times and tougher market conditions.

“You’ve got more money to make money with, and more money to lose money with too,” said Mike Burns, executive director of the Alaska Permanent Fund.

Indeed, the fund’s 2009 fiscal year covered both record oil prices and the fall of Lehman Brothers — and the ensuing stock market plunge. The fund reported a loss of 18.5% that year, but it generated 20.5% returns in fiscal year 2011.

he fund also makes longer-term bets on real estate and infrastructure.

Alaska’s fund is a 50% owner of the Manhattan headquarters of megabank UBS. It also owns a piece of Tyson’s Corner mall outside of Washington, D.C., and the North Bridge shopping mall in downtown Chicago.

The fund even has stakes in airports in London and Vancouver, a waste disposal plant in Great Britain and a propane storage plant in India. To top of page

Higher prices boost Big Oil profits as production slows


This May 5, 2011 file photo shows gasoline prices of $5.09 USD displayed at an Exxon station in Washington, DC. ExxonMobil, the world’s largest energy company, on October 27, 2011 posted a 41 percent profit jump for the second consecutive quarter as sales soared. Net earnings rose to $10.33 billion, or $2.13 per share, in the July-September period, the company said. Sales increased 31.5 percent from a year ago to $125.33 billion, outstripping analyst forecasts of $113.56 billion. AFP PHOTO/Karen BLEIER (Photo credit should read KAREN BLEIER/AFP/Getty Images)

Associated Press | Oct 29, 2011

By CHRIS KAHN

Higher oil prices have masked a slowdown in production among the biggest oil companies.

Exxon Mobil, Royal Dutch Shell and BP reported a surge in quarterly profits this week even though they’re producing less oil from fields around the world, including a combined 7 percent decline in the third quarter that just ended. Each company has devoted billions of dollars to finding new petroleum deposits, but it could be years, even decades, before those investments translate to more oil and natural gas.

Experts say smaller companies will need to step up to satisfy growing world demand. China, India and other developing nations are expected to push the global appetite for oil to a record 90 million barrels per day next year, enough to outstrip supplies.

Three years ago, a severe drop in oil supplies helped push oil prices to above $147 per barrel, saddling airlines and shipping companies with high fuel costs. Gasoline prices soared above a national average $4 per gallon.

“We’re not at the point where oil prices are going to go bananas” and spike like they did in 2008, said Ken Medlock, an energy expert at Rice University. “But if we saw production declines like this for five or six years, then it’s time to worry.”

Big Oil’s third-quarter financial results highlight a growing problem within the industry. New petroleum sources are increasingly tough — and expensive — to find. The best new deposits are found more than a mile under the ocean, or in vast layers of sticky Canadian sand, or in the frigid Arctic.

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Costs have increased dramatically as the industry digs deeper.

A decade ago, tapping a new well used to cost about $10 to $20 for every barrel of oil produced. Now it’s estimated at about $50 or $60 for wells in the Gulf of Mexico and $70 or $80 in the Canadian oil sands.

To boost production, oil companies not only must find new sources of oil, they need to make up for production losses at aging fields. Exxon’s fields, for example, are declining by 5 to 7 percent each year, Oppenheimer & Co. analyst Fadel Gheit said.

“They need to add 200,000 to 300,000 barrels a day of production just to break even,” Gheit said. “That’s huge.”

Overall, analysts think oil producers can still increase supplies in coming years, thanks to smaller companies and increased contributions from OPEC. But it may not be enough to keep up with demand.

Morgan Stanley analyst Hussein Allidina expects supplies to rise by about 1 percent to 2 percent every year until 2016. That assumes “flawless execution,” Allidina said in a research note. Even if that happens, demand will grow 1.5 percent every year over the same period.

It raises the possibility of price spikes. A surge in oil not only means higher fuel prices, it also poses problems for the industry. The record jump in oil prices in 2008 may have led to record profits for Exxon that year, but it weakened the economy so much that prices eventually plunged. That sapped profits in later quarters and forced the industry to table many projects.

Smaller companies are expected to ramp up in fields that are too tiny for Big Oil. For example, Occidental Petroleum said it has increased oil production about 4 percent so far this year. Saudi Arabia and a handful of other OPEC members have the ability to put more oil on the market, if needed. And Libya is expected to start exporting oil again later this year following an eight-month rebellion.

Exxon Mobil on Thursday said profits jumped 41 percent in the third quarter to $10.33 billion, or $2.13 per share, as higher oil and natural gas prices made up for lower production. Profits doubled for Shell and BP for the same reason. Chevron, the second-largest U.S. oil company, is expected to report its financial results on Friday.

Exxon sold oil in the U.S. for an average of $95.58 a barrel, up 35.2 percent from a year earlier. Internationally, it charged $107.32 a barrel, up 45.4 percent. It also charged more for natural gas.

The higher prices propped up earnings at Exxon’s exploration and production business, which finds and pumps oil and natural gas.

Exxon’s U.S. refineries also benefited. Their profits quadrupled as demand for gasoline and other fuels soared around the world, enabling them to charge more.

Exxon shares rose 81 cents, or 1 percent, to $81.88. BP shares climbed 78 cents to $45.43.

Oil prices also jumped 4 percent to end the day at $93.96 per barrel in New York.

Strippers earning up to $2,000 a night in North Dakota town thriving amid oil boom

In a North Dakota oil boomtown, there’s one job market that never goes bust: Stripping.

Daily News | Oct 26, 2011

BY Larry Mcshane

A pair of strip clubs in Williston, N.D., are drawing exotic dancers who can earn up to $2,000 a night thanks to the influx of well-paid oil workers in the remote region, CNN Money reported.

“My best girls would rather dance here than in Vegas, because they make more money here,” boasted Melissa Slapnicka, co-owner of the club Whispers.

Slapnicka, who says aspiring strippers from Alaska, Germany and the Czech Republic have applied for work at her club, said the patrons are quick to spread their oil money around.

The co-owner/bartender says her tips – once $50 a night – are now more like $200 each evening.

And it’s even better for the talent. One stripper told CNN that she was making more in a single night than she could earn in a week on the Las Vegas strip.

“We make more than doctors,” she said. “Back in the day, it was hard to make $200 a night. It was like pulling teeth. Now you can pull in $2,000 a night.”

The oil workers are making big bucks, and have few options in spending their cash. Many of the customers at Whispers and nearby Heartbreakers are married men who chased the oil money to North Dakota – and left their families at home.

“They’re just here for a little company, because they’re lonely,” the stripper told CNN Money. “Other places, (men) wait until Friday because it’s payday.

“But here, they don’t wait. It’s payday everyday.”

Tony Blair linked to Libyan deal with Russian oligarch


Tony Blair with his business partner, “The Leader”. Mr Blair’s own business dealings remain opaque Photo: GETTY

Emails reveal how bank employing former PM tried to oil the wheels of a deal between Russian’s aluminium firm and the Libyan regime

Telegraph | Sep 24, 2011

by Robert Mendick

As he sat back on the private jet, reclining in his comfortable leather armchair, Tony Blair must have felt grateful to his benefactor and friend Colonel Muammar Gaddafi for such largesse. It made Mr Blair’s trip from Libya back to London altogether more civilised than the regular British Airways flight he would have otherwise had to take.

The Bombardier Challenger 300 jet, hired by the tyrant’s regime at a cost of £70,000, was used on at least two occasions by Mr Blair and his entourage to fly to Tripoli. Robert Mugabe, coincidentally, was offered the same jet by Gaddafi on one of his visits to Libya.

Inquiries by The Sunday Telegraph show that Mr Blair visited “The Leader” – as Mr Blair’s staff deferentially described Gaddafi in official correspondence – on six occasions between June 2007, when he quit Downing Street, and June last year.

But what Mr Blair was doing there on such a frequent basis remains something of a mystery.

His numerous websites fail to mention the trips at all. His spokesman declined to answer questions about the frequency of the visits and what was precisely discussed.

So what was Mr Blair up to and why all the secrecy? Email correspondence obtained by the anti-corruption campaign group Global Witness, and seen by this newspaper, shows that Mr Blair was linked to a multi-billion-dollar deal being set up in Libya by JP Morgan, the US investment bank.

Mr Blair is paid a reported £2 million a year as a senior adviser to the bank. Given his extensive contacts established during 10 years in Downing Street, he may be cheap at the price.

JP Morgan was trying to broker a deal between the Libyan Investment Authority (LIA), a £50 billion sovereign wealth fund, and Rusal, the world’s biggest aluminium producing company, founded by Oleg Deripaska, the Russian oligarch and friend of Lord Mandelson. There is no suggestion that Lord Mandelson, who at the time was business secretary, was in any way involved in the proposed deal.

Mr Deripaska is not only well-heeled – his fortune was estimated at its peak at £17 billion – but terribly well connected. His acquaintances have included the financier Nat Rothschild and, for a period at least, Saif Gaddafi, the dictator’s most influential son.

George Osborne was, along with Lord Mandelson, a guest on Mr Deripaska’s yacht in the summer of 2008 in Corfu. The lunch on the yacht led to a political storm over claims – vehemently denied – that Mr Osborne had attempted to solicit a £50,000 donation for the Conservative party.

Lord Mandelson, who first met Mr Deripaska in 2004, was also caught up in the fallout from the affair. At the time he was an EU trade commissioner who had authorised cuts in European aluminium import duties. Rusal was one of the main beneficiaries, although Lord Mandelson strongly denied any conflict of interest and said the change in tariffs had not been initiated by him.

At the time the JP Morgan emails were written, in December 2008 and March 2009, Rusal was in financial difficulties, mired in its attempts to restructure about £4.5 billion of debt owed to foreign banks.

If JP Morgan could put a deal together between the LIA and Rusal, then its fees would be huge. Documents seen by The Sunday Telegraph show Rusal was looking for a loan of around £3 billion in the form of a convertible bond, which would be converted into an equity stake in Rusal at a later date.

One source said the LIA was looking at providing a loan of about £1.3 billion. Had the convertible bond deal gone ahead – it later floundered for reasons JP Morgan refuses to go into – the bank could have netted fees of between £25 million and £50 million.

The first of the emails obtained by Global Witness was sent on Dec 28, 2008, from JP Morgan to Mustafa Zarti, the then vice-chairman of the LIA.

Mr Zarti, 41, was one of Libya’s most powerful money men and — this is no coincidence — a close friend of Saif Gaddafi, whom he met when the pair were studying in Vienna.

Written by Lord Renwick, JP Morgan’s vice-chairman and a former British ambassador to the US, the email states: “Dear Mr Zarti, On behalf of JP Morgan, we would like to invite you to London in the week beginning 12 January to finalise the terms of the mandate concerning Rusal before Mr Blair’s visit to Tripoli which is scheduled to take place on around 22 January.

“I will look forward very much to meeting you and to introducing you to the members of the JP Morgan team and we would of course like to host a dinner for you while you are here.

“Could you very kindly let me know what date might be convenient for you to visit London? With best wishes Robin Renwick.”

Lord Renwick, incidentally, was made a Labour peer by Mr Blair in 1997, although he now sits in the House of Lords as a cross-bencher.

Mr Blair subsequently visited Col Gaddafi on Jan 22. No details of the discussions between the two men appear in public records.

The meeting merited a mention by the Qatar News Agency. Its report declared that the pair had discussed a “host of international issues” but gave no further details. Last week, JP Morgan said Mr Blair had no knowledge of the deal that the bank was trying to set up between the LIA and Rusal.

Two months later, JP Morgan was still involved with the LIA and Rusal.

In a second email obtained by Global Witness, which was sent on March 11, 2009, to Mr Zarti, Lord Renwick enclosed details of the convertible bond deal that Rusal was hoping to put together.

Lord Renwick wrote that a “number of clarifications are still needed and they [Rusal] are still finalising their proposal. When they have done so, we will pass this on to you with our analysis of it, so that you can then decided [sic] whether you would wish to pursue the matter.”

Lord Renwick concluded: “Meanwhile, we very much appreciate our co-operation with you on other issues.”

It is not clear what those other issues were or whether Mr Blair had any involvement in them.

A month later, on April 7, Mr Blair’s private office wrote to the British embassy outlining another planned visit to Tripoli. In the email, Mr Blair’s office noted that he hoped to meet not only Gaddafi but senior figures in the LIA including Mr Zarti. Mr Blair met Gaddafi on April 30; it is not known if the meeting with Mr Zarti went ahead.

In September 2009, nine months after Lord Renwick’s first known email to Mr Zarti, it was reported that talks between LIA and Rusal had broken down. “It [Rusal] had been in active discussions with the Libyans about selling a 10 per cent stake in the Russian group,” said one report at the time.

A JP Morgan spokesman said: “JP Morgan declined to participate on such a transaction and thus Mr Blair was never involved, and it was never discussed with him.”

Although JP Morgan had dropped out of the deal, all was not lost for Rusal and the LIA. Perhaps JP Morgan’s services were no longer needed.

By the summer of 2009, Mr Deripaska and Saif Gaddafi, who had influence with the LIA, were said to be acquaintances. Mr Gaddafi hosted a 37th birthday party that year to which Mr Deripaska and Mr Rothschild were reportedly invited. Mr Deripaska, who has a £20 million home in Belgravia in London and speaks fluent English, instead floated Rusal on the Hong Kong stock market in January 2010 and the LIA bought $300 million worth of shares, the largest single purchase in the flotation. The flotation was a success and, with Rusal’s debt restructured, Mr Deripaska’s business was secure, although the LIA would lose $50 million in six months as Rusal’s share price dropped.

Mr Blair’s own business dealings remain opaque. He insists that he was not involved in, or even told about, the JP Morgan negotiations in Libya; in which case, it seems curious that the investment bank was dropping his name without his knowledge.

But then again, JP Morgan could be excused for cashing in on their best connected and most bankable asset.

China Opens Oil Field in Iraq


A China National Petroleum Corporation engineer working at Iraq’s Al Ahdab oil field.

nytimes.com | Jun 28, 2011

By EDWARD WONG

BEIJING — China’s largest oil company has begun operations at Al-Ahdab oil field in Iraq, making the field the first major new area to start production in Iraq in 20 years, according to an official news report on Tuesday.

Operations began June 21, and the field is expected to produce three million tons of crude oil per year, reported China Daily, an official English-language newspaper. The oil field was discovered in 1979 and is believed to contain a billion barrels of crude.

The Chinese company, the China National Petroleum Corporation, a state-owned enterprise, secured rights to the field under a technical services contract signed with the Iraqi government in November 2008. Under the contract, the company has development rights for 23 years, China Daily reported. It is investing $3 billion.

The contract, the renegotiation of a deal first signed in 1996 with the government of Saddam Hussein, was postponed after the United Nations imposed economic sanctions on Iraq and the American military toppled Mr. Hussein in 2003. Analysts say the Ahdab operation is China National Petroleum’s largest in the Middle East.

The contract stipulates that the company receive a fee for every barrel of oil produced, rather than an equity interest in the oil field, as it would have under the original agreement with Mr. Hussein’s government. A Chinese oil executive said in 2009 that the company would make a profit of less than one percent, but that the contract was a way to “get a foot in the door” of the Iraqi oil industry, which has much larger fields than Ahdab.

The deal began drawing intense criticism from residents and officials in Wasit Province, where the field is located, shortly after the contract was signed. Some people demanded that Wasit be granted a royalty of $1 a barrel to improve access to clean water, health services, schools, roads and other public needs in the province, which is among Iraq’s poorest. The Iraqi government rejected the demands.

Local residents complained in 2009 that Chinese development of the field would have no benefits for them, other than providing several hundred people with jobs as laborers and security guards for less than $600 a month. At the time, China National Petroleum said it was in an exploration phase and did not need much labor. Now, with the start of production, it is unclear whether the company has hired more residents. At the time, the 100 Chinese workers at the compound were too scared to leave the area for fear of being kidnapped.

The Ahdab field’s estimated reserves are small by Iraq’s standards. The Rumaila field near the southern city of Basra, for which China National Petroleum and BP signed a development deal in June 2009, is Iraq’s largest oil field, with an estimated 17.8 billion barrels. Iraq as a whole is estimated to have reserves of more than 100 billion barrels.

China’s energy needs have soared, and it has been scouring the world for energy sources. On Tuesday, President Omar Hassan al-Bashir of Sudan, in which China has large oil interests, arrived in Beijing for talks with Chinese leaders. Mr. Bashir faces indictment by the International Criminal Court on war crimes and genocide charges, but China is not obligated to arrest him because it is not a signatory to the Rome Statute that established the court. He is scheduled to meet President Hu Jintao on Wednesday.

Gulf oil spill cleanup workers report medical problems; lawsuit filed


Cleanup workers shovel and bag oiled sand on the beach in Or­ange Beach on June 15, 2010, after the oil spill on the Gulf Coast. Some workers have joined a lawsuit after reporting health prob­lems. / Advertiser file

montgomeryadvertiser.com | Jun 25, 2011

by Mary Sell

The three didn’t have much in common before April 2010.

Gary Stewart of Mobile grew up on the water. After the explo­sion on the Deepwater Horizon rig and the subsequent oil spill, the company he captained a boat for signed on to help with the cleanup. He didn’t know until the day he left for a 28-day assignment that his boat would be spreading a chemi­cal dispersant near the site of the destroyed oil rig in the Gulf of Mexico. For more than a month, he says, he worked and lived without a respirator.

Ricky Thrasher of Orange Beach answered an ad on Craigslist and got himself on a shrimping boat that was rounding up oil in the Vessels of Opportunity program. He saw it as a chance to do some good, and make some good money.

“I was out there for six days, and I had to call them to come get me, I was so sick,” Thrasher said. He’s still sick. Among his list of symptoms are as many as 16 bowel movements a day.

Robyn Hill of Foley worked as a greeter of sorts to the tourists on Gulf Shores’ beaches. It was the greatest job, she said. After the oil began coming ashore, the tourists had to share the beach with environmental­ists, hazardous materials teams and the media. But her job didn’t change.

“We were still in our shorts and T-shirts, greeting people.”

Until she passed out on the beach one day in June.

They didn’t have much in common before last year. Now Stewart, Thrasher and Hill are unemployed, unin­sured, in debt and in pain. They say they can’t work; they can barely function.

They say they used to be healthy. Now they’re not.

They say they had no clue what they were working with and were being exposed to during the oil spill cleanup process.

And they want someone to make it right — to make them right.

The three are now part of a multidistrict litigation filed in U.S. District Court in New Orleans. Plaintiffs are asking for compensatory and puni­tive damages and medical screening and monitoring. Defendants include BP, which owned the oil well and was leasing the Deepwater Horizon rig, Transocean Ltd., which owned the rig, and Nalco Co., the company from which BP purchased chemical dispersants to use in the cleanup.

Full story

150 Chemicals Are No Longer Incognito


green.blogs.nytimes.com | Jun 13, 2011

By JOANNA M. FOSTER

This month the Environmental Protection Agency made public the names of 150 chemicals that were investigated in health and safety studies but whose identities were withheld as confidential business information.

Fresh crude and oil broken down by dispersant in the Gulf of Mexico in May 2010. Several ingredients of Corexit, the chief dispersant that BP used to dissolve the oil after the Deepwater Horizon spill, are among 150 chemicals whose identities have been disclosed by the E.P.A.European Pressphoto AgencyOil broken down by dispersant in the Gulf of Mexico last year. Some ingredients of the dispersant Corexit were among 150 chemicals whose identities were disclosed by the E.P.A.

The release of the information, which identified chemicals researched in 104 studies, reflects a slow but determined effort by the E.P.A. to reform what it views as a flawed system for regulating toxic substances. It is the second disclosure of its kind this year, after the release of 40 chemicals’ names in March.

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The agency is working to remedy what it views as the abuse of so called C.B.I. privileges, which prevent the public from learning that a specific chemical may pose risks.

The chemicals’ identities were withheld under the Toxic Substances Control Act, a 1976 law that gives the E.P.A. the authority to set reporting and testing requirements for chemical substances. (Food, drugs, cosmetics and pesticides are exempted from that law.) Critics have faulted the measure as ineffective in protecting the public, noting that 17,000 of the 84,000 chemicals on the agency’s toxic substances inventory are not publicly identified at the manufacturers’ request.

At the time of the law’s passing, industrial chemicals were deemed innocent until proven guilty, meaning that it was the E.P.A.’s responsibility to show that a chemical posed a potential risk, not the manufacturer’s to demonstrate its safety. Since 1976, 22,000 new chemicals have been approved by the agency; 62,000 were already on the market when the law was passed.

Although the agency has the authority to review and challenge the confidentiality requests, it has lacked the capacity to cope with the tens of thousands filed each year. On average, only about 14 cases have been reviewed annually, although that pace is now accelerating.

When health and safety data have been submitted to the E.P.A. on a specific chemical, the bar in theory is supposed to be set higher, allowing the chemical’s name to be withheld only if a study reveals sensitive details of the chemical’s manufacturing process or a specific, proprietary formulation. Yet once a chemical’s name had been protected as confidential during its early development, its identity tended to remain confidential indefinitely.

Included on the list of 150 chemicals issued on Wednesday are several components of Corexit, a dispersant manufactured by Nalco that was used to break down oil from the Deepwater Horizon spill last year in the Gulf of Mexico.

Medical professionals and ecologists will now have access to the health and safety data for chemicals on the list, opening the way for a deeper understanding of the risks of exposure for humans and marine wildlife.